For a 30% Interest in Partnership Capital, Profits, and Losses

question 14

Multiple Choice

For a 30% interest in partnership capital, profits, and losses, Carol contributes a machine with a basis of $40,000 and an FMV of $80,000. The partnership assumes a $70,000 recourse liability on the machine. At the time of the contribution, the partnership had recourse liabilities of $10,000. Partners share the economic risk of loss from recourse liabilities in the same way they share partnership losses. Following the contribution, Carol has

• A) a capital gain due to the contribution of $6,000 and a zero basis in the partnership interest.
• B) a $34,000 basis in the partnership interest and no gain or loss.
• C) a capital loss due to the contribution of $6,000 and a zero basis in the partnership interest.
• D) a $43,000 basis in the partnership interest and no gain or loss.

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